Sinclair Broadcast Group(SBGI) - 2020 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Consolidated media revenue for Q2 increased to $539 million due to the inclusion of the Local Sports segment, which was not present in the previous year's results [47] - On a pro forma basis, total media revenues were $1.260 billion, down from $1.710 billion year-over-year, primarily due to pandemic-related advertising market weakness and absence of live sports [47][50] - Adjusted EBITDA on a consolidated basis increased 31% to $254 million, but on a pro forma basis, it declined by $391 million [54] - Consolidated adjusted free cash flow was $46 million, which was $79 million below the lower end of guidance [57] - Total debt at the end of Q2 was $12.399 billion, with a net leverage ratio of 6.4 times [68] Business Line Data and Key Metrics Changes - Core advertising for broadcast and other segments declined 36% in Q2, with a significant improvement noted in June, where the decline was 26% [12][50] - Sports segment adjusted EBITDA was $110 million, down from $440 million year-over-year, primarily due to distributor rebate accrual and absence of live games [55][67] - Media revenues for the Sports segment decreased 38% to $616 million compared to pro forma results of $992 million in the previous year [65] Market Data and Key Metrics Changes - Subscriber churn across all segments was 7% year-over-year, slightly higher than previous trends, attributed to COVID-19 impacts [52] - The advertising market showed signs of recovery, with July finishing down 20% compared to the previous year [51] Company Strategy and Development Direction - The company is focused on leveraging growth opportunities in sports betting and enhancing non-game programming to improve viewership and revenue [22][24] - The launch of NEXTGEN TV technology is expected to enhance broadcast quality and provide new monetization opportunities [25][28] - The company has locked up approximately 85% of RSN subscribers for at least two years following a successful agreement with Comcast [29][85] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery of the advertising market and the upcoming political season, which is expected to mitigate weaknesses in core advertising [14][51] - The company acknowledged ongoing challenges due to COVID-19 but remains committed to managing expenses and optimizing capital structure [62][70] Other Important Information - The company has repurchased approximately 19 million shares, representing 21% of total shares outstanding since the beginning of the year [37] - A new headline news service is set to launch in early 2021, focusing on breaking local news stories [34] Q&A Session Summary Question: Improvement in core advertising and COVID impacts - Management noted consistent improvement in core advertising bookings, although they are being booked later than usual due to COVID-19 [77][79] Question: Stability of subscriber base and cord-cutting outlook - Subscriber churn was reported at 7%, with management forecasting similar levels for Q3 due to economic conditions [82] Question: Comcast renewal and distribution percentages - Management confirmed that 85% of RSN subscribers are locked in for two years or more following the Comcast agreement [85] Question: Timing of cash inflows from team rebates - Management clarified that cash inflows from team rebates are expected in Q3 and Q4, while cash outflows to distributors will occur after 2020 [86][89] Question: Liquidity and capital structure management - Management emphasized a commitment to strengthening the capital structure and exploring various options for debt management [91][92] Question: Recent station renewals and retransmission growth outlook - Management refrained from providing full-year guidance on retransmission growth due to market variability [121]